General information requirements

Corporate name and scope of application

Banco Bilbao Vizcaya Argentaria, S.A. (hereinafter the "Bank" or "BBVA") is a private law entity subject to the rules and regulations of the banking entities operating in Spain and carries out its activity through branches and agencies throughout the country and abroad.

The bylaws and other public information are available for consultation at the Bank's registered office (Plaza San Nicolás, 4, Bilbao) and on its website (www.bbva.com).

Solvency regulations are applicable at a consolidated level for the whole Group.

Differences between the consolidable group for the purposes of solvency regulations and accounting criteria.

The Group's Consolidated Financial Statements are presented in accordance with the International Financial Reporting Standards adopted by the European Union (hereinafter referred to as 'IFRS-EU') applicable as of December 31, 2020, considering the Bank of Spain Circular 4/2017, and its successive modifications and the other provisions of the financial reporting framework which are applicable and the marking and format requirements stablished by Regulation EU 2019/815 of European Commision.

On the basis of accounting criteria, companies are considered to form part of a consolidated group when the parent entity holds or can hold, directly or indirectly, control of them. An institution is understood to control a subsidiary when it is exposed, or is entitled to, variable returns as a result of its involvement in the subsidiary and has the capacity to influence those returns through the power it exercises over the subsidiary. For control to exist, the following aspects must be fulfilled:

  • a) Power: An investor has power over a subsidiary when it has current rights that provide it with the capacity to direct its relevant activities, i.e. those that significantly affect the returns of the subsidiary.
  • b) Returns: An investor is exposed, or is entitled to variable returns, as a result of its involvement in the subsidiary when the returns obtained by the investor for such involvement may vary based on the economic performance of the subsidiary. Investor returns can be positive only, negative only, or positive and negative at the same time.
  • c) Relationship between power and returns: An investor has control over a subsidiary when it not only has power over the subsidiary and is exposed, or is entitled to, variable returns for its involvement in the subsidiary, but it also has the capacity to use its power to influence the returns it obtains due to its involvement in the subsidiary.

    • Therefore, in drawing up the Group’s Consolidated Financial Statements, all dependent companies and consolidating structured entities have been consolidated by applying the full consolidation method.

    Associated companies, as well as joint ventures (those over which joint control arrangements are in place), are valued using the equity method.

    The list of all the companies forming part of the Group is included in the appendices to the Group’s Consolidated Financial Statements.

    For the purposes of solvency regulations, the following subsidiaries form part of the consolidated group, as defined in Article 18 of the CRR:

    • Credit institutions
    • Investment firms
    • Financial institutions

      A financial institution is a company, separate from other institutions (credit institution or investment firm), whose main activity consists of acquiring holdings or performing one or more of the following activities:

    • Loans, including in particular consumer finance, credit agreements relating to immovable property, recourse and non-recourse factoring, and financing of commercial transactions (including forfaiting)
    • Financial leasing
    • Payment services
    • Issuing and managing other payment channels (e.g. traveller’s cheques and bank cheques)
    • Granting of guarantees and commitments
    • Trading on their own account or on behalf of customers on any of the following instruments:
    • - Money market instruments (cheques, bills, certificates of deposit etc.)
    • - Foreign currency
    • - Financial futures and options
    • - Foreign-exchange or interest-rate instruments
    • - Marketable securities
    • Participating in the issuance of securities and the provision of corresponding services
    • Advising companies with regard to capital structure, industrial strategy and related matters, as well as advice and services for mergers and acquisitions of companies
    • Brokerage in the interbank markets
    • Managing or advising on equity management
    • Custody and administration of marketable securities
    • Issuance of electronic money

    This definition includes financial holding companies, mixed financial holding companies, payment institutions and asset management firms, but excludes pure industrial holding companies, insurance companies, insurance holding companies and mixed insurance holding companies.

    • Auxiliary services companies: A company whose main activity is holding or management of property, management of computing services or any other similar activity of an auxiliary nature with regard to the main activity of one or more institutions (credit institution or investment firm).

    Therefore, for the purposes of calculating solvency requirements, and hence the drawing up of this Prudential Relevance Report, the scope of consolidating entities is different from the scope defined for the purposes of drawing up the Group’s Consolidated Financial Statements.

    The effect of the difference between the two regulations is mainly due to:

    • Withdrawals from the balance made by entities (largely insurance companies regulated by the regulatory framework of Solvency II) that are consolidated in the Group’s Consolidated Financial Statements by the full consolidation method and consolidated for the purposes of solvency by applying the equity method.
    • Entries to the balance contributed mainly by financial entities consolidated by applying the equity method at the accounting level, but for purposes of solvency, are proportionally integrated.

    The list of entities that use different consolidation methods in their public and regulatory balance sheets is included in table LI3 in Appendix 1 to the file titled, "Excel Tables and Pillar III 2020 Appendices", which is included with this report and is available in the Shareholders and Investors/Financial Information section of the Group's website.

    Main changes in the Group in the 2020 financial year

    In 2020, the BBVA Group underwent two significant divestment operations, which are detailed in Note 3 to the Consolidated Annual Accounts. These operations involved the agreement reached with Allianz to jointly boost the non-life insurance business in Spain, which was finalised in December 2020, and the agreement to sell BBVA USA and other subsidiaries in the United States with activities related to the banking business. The closing of this agreement is subject to the receipt of regulatory authorisations from the relevant authorities.

    Furthermore, on 22 January 2021, once all required authorisations had been obtained, BBVA completed the sale of its direct and indirect holdings of 100% of the share capital of Banco Bilbao Vizcaya Argentaria Paraguay, S.A. ("BBVA Paraguay") to Banco GNB Paraguay S.A., part of the Gilinski Group. This sale will have a positive impact on the Group's fully loaded CET1 ratio of approximately +6 basis points, which will be reflected in the BBVA Group's capital base for the first quarter of 2021 (see Note 56 to the Group's Consolidated Annual Accounts).

    As result of the agreement to sale BBVA USA, as of 31 December 2020 in the Group's consolidated public balance sheet, all the items on the balance sheet of BBVA USA, have been reclassified to the category of "Non-current assets (liabilities) and disposal groups classified as held for sale". The same treatment applied in this report for those breakdowns that, in compliance with the respective RTS/ITS of the EBA, are made based on information from the FINREP Statements (indicated in the respective breakdowns).

    On the contrary, for the purposes of prudential consolidation and in compliance with article 18 of the CRR, both in the Corep Statements submitted to the Supervisor, and in the disclosures of this report other than those mentioned above, BBVA USA's assets and liabilities are presented in their respective balance sheet headings.

    This also applies to BBVA Paraguay, whose balance sheet items have been reclassified as "Non-current assets (liabilities) and disposal groups held for sale" since 2019, when the sale agreement was reached with Banco GNB Paraguay, S.A.

    For more information on the main transactions during the year, see Note 3 of the Group's Consolidated Financial Statements.

    Reconciliation of the Public Balance Sheet from the accounting perimeter to the regulatory perimeter

    This section includes an exercise in transparency to show the reconciliation process between the book balances reported in the public balance sheet (attached to the Group’s Consolidated Financial Statements) and the book balances this report uses (regulatory perimeter), revealing the main differences between both perimeters. This comparison is affected by the classification of BBVA USA's and BBVA Paraguay's assets and liabilities as "Non-current assets (liabilities) and disposal groups held for sale" in the public balance sheet, while they are classified on the prudential balance sheet under their respective balance sheet headings in accordance with the prudential method of consolidation established by the CRR (see Chapter 1.3).

    CC2 – Reconciliation of regulatory capital to the balance sheet

    Million Euros

    Public Balance Sheet Headings Public Balance Sheet Regulatory balance sheet Reference to template CC1
    Cash, cash balances at central banks and other demand deposits 65,520 77,557
    Financial assets held for trading 108,257 109,759
    Non-trading financial assets a mandatorily at fair value through profit or loss 5,198 1,619
    Financial assets designated at fair value through profit or loss 1,117 -
    Financial assets at fair value through accumulated other comprehensive income 69,440 59,379
    Financial assets at amortized cost 367,668 424,956
    Derivatives - Hedging derivatives 1,991 1,863
    Fair value changes of the hedged items in portfolio hedges of interest rate risk 51 51
    Joint ventures and associates 1,437 4,382
    Insurance and reinsurance assets - -
    Tangible assets 7,823 8,326
    Intangibles assets 2,345 4,246 g)
    Tax assets 16,526 16,557
    Of which: deferred tax assets 15,327 15,353 h)
    Other assets 2,819 5,932
    Non-current assets and disposal groups classified as held for sale (1) 85,987 1,223
    Total Assets 736,176 715,850
    Financial liabilities held for trading 86,488 86,933
    Financial liabilities designated at fair value through profit or loss 10,050 4,531
    Financial liabilities at amortized cost 490,606 561,576 o) p) r)
    Derivatives - Hedging accounting 2,318 2,157
    Fair value changes of the hedged items in portfolio hedges of interest rate risk - -
    Liabilities under insurance and reinsurance contracts - 67
    Provisions 6,141 5,816
    Tax liabilities 2,355 1,668
    Of which: deferred tax liabilities 1,809 1,142
    Other liabilities 12,753 3,267
    Liabilities included in disposal groups clasified as held for sale (1) 75,446 -
    Total liabilities 686,156 666,015 -
    Capital 3,267 3,267 a)
    Share premium 23,992 23,992 a)
    Equity instruments issued other than capital - - b)
    Other equity 42 42 b)
    Retained earnings 30,508 29,974 b)
    Revaluation reserves - - b)
    Other reserves (164) 275 b)
    Less: treasury shares (46) (46) l)
    Profit or loss atributable to owners of the parent 1,305 1,253 e)
    Less: interim dividend - - e)
    Accumulated other comprehensive income (loss) (14,356) (14,341) c) i) k)
    Minority interest (non-controlling interest) 5,471 5,417
    Total equity 50,020 49,834
    Total equity and total liabilities 736,176 715,850

    (1) In the public balance sheet the assets and liabilities of BBVA USA and BBVA Paraguay are classified as “Non current assets held for sale” and “Non current assets held for sale”, while in the regulatory balance sheet they are classified under their respective balance sheet headings in accordance with the prudential consolidation established by the CRR (see section 1.1.3).

    The main differences between the public balance sheet and the regulatory balance sheet, apart from the sales of BBVA USA and BBVA Paraguay, are due to withdrawals from the balance generated by insurance, real estate and financial entities that are consolidated through the application of the equity method for the amount of -21,312 million euros; and balance entries generated by entities that are consolidated using the proportional integration method for an amount of +986 million euros.

    For more details, see section 1 of the Report.

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